Total Bond Market ETFs Maintain Momentum

July 26th at 2:30pm by Tom Lydon

European debt issues have been back in focus as Spain’s benchmark for 10-year debt hit 7.5%, and short selling on all stocks have been banned. Investors have been cautious, leading to weakness in most stock market sectors, but bond focused exchange traded funds have seen continued interest.

“We believe the [bond] market should continue to grow for several reasons. First, changing demographics in the U.S. and abroad are going to result in more and more investors seeking income-producing investments, and since ETFs provide an efficient way to access fixed income, they should benefit significantly,” Matthew Tucker wrote on Seeking Alpha.

The “risk-off” trading mood has investors nervous about the global equities market. Total bond market ETFs focused on the U.S. have continued to be a safe haven for skeptics.

The iShares Barcalys Aggregate Bond Fund ETF (NYSEArca: AGG) tracks the total performance of the U.S. bond market. The Barclays Capital U.S. Aggregate Bond Index seeks to reflect the performance of all U.S. bonds including United States Treasury Bonds, investment grade corporate bonds, and mortgage pass-through securities. AGG gained 2.6% over the past three months. [ETF Spotlight: AGG]

The Vanguard Total Bond Market (NYSEArca: BND)  keeps pace with U.S. bond market returns. The fund invests in over 3,000 bonds that represent the U.S. investment-grade market . The ETF has the potential to offer investment income and for diversifying the risks of equities in a portfolio. BND gained about 2.7% over the past three months.  [Fixed Income ETFs Bolster U.S. ETF Market]

The sluggish economies in the developed world has spurred investors to put a great deal of assets into fixed-income ETFs. U.S. listed bond ETF assets have gained about 40% in total to $211.49 billion over the first half of 2012. [Total Bond Market ETFs]

Tisha Guerrero contributed to this article. 

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

Tickers

AGG BND